Facing The Gloomy Situation, How Can Lining Win The Battle?

Li Ning Co has to face the new bad situation.

Li Ning Co Ltd (hereinafter referred to as Li Ning Co) 2012 China Daily reported that its revenue in the first half of last year was at least the same period in the past five years, down nearly 10% from last year, and gross profit decreased from 2 billion yuan last year to 1 billion 700 million yuan.

Although the Li Ning Co's multi brand line has made some achievements, the growth rate of red double happiness is 17.6%, and the brands such as AI Gao and Kaisheng are gaining about 50%, but these brands account for less than 1/10 of the total revenue of Lining.

Another news is that the average stock days of Li Ning Co have risen from 72 days in the first half of last year to 95 days.

The bad news from Li Ning Co is not just that.

The internationalization strategy, which was once mentioned by the Li Ning Co countless times, seems to have some problems. In the course of more than ten years of internationalization, the real market opened by Li Ning Co is in Spain. But with the deepening of the Spanish economic crisis, the authorized business of Lining obviously suffers from the financial deficit which is hard to make up, so that it finally goes bankrupt.

It has lost half of its employees in the design center of Portland, and the Foot LockerInc. agreement with us partners has also been suspended.

The Li Ning Co is located at the store in Cameron Road, Tsim Sha Tsui, Hongkong, China, which is the only branch of Lining in Hongkong.

When it opened in 2009, Li Ning Co said that stores in Hongkong need to pave the way for brand internationalization.

Closing the store may mean that Lining temporarily gave up the Chinese market in Hongkong.

According to the China Daily, the proportion of overseas income in Lining's overall income rose from only 1.7% last year to 2.2%. Such a slow growth trend can basically be considered.

The internationalization strategy is not smooth.

Li Ning Co is also being pressed by competitors in China.

The revenue of domestic brands Anta and PEAK has been close to Lining, and some indicators have surpassed Lining. A new example is that the Chinese Olympic Committee's strategic partner has been taken away by Anta.

Li Ning Co even issued an early warning that the total number of orders in the fourth quarter of 2012 showed a high double-digit decline, and annual revenue and profits would be negative.

Lining's wealth has also shrunk dramatically. In the latest Hurun rich list, Lining's ranking dropped by 280.

In view of this gloomy situation, Li Ning Co explained: "under the influence of the overall economic environment and the industrial environment, the development speed of China's sporting goods industry has further slowed down, and the pressure on channel inventory has intensified.

At the same time, retail terminal competition is becoming more intense, retail discount has increased, while human cost and rental cost continue to increase, resulting in a further decline in terminal profit margins.

The crisis has long been latent.

Li Ning Co has built China's largest sports brand sales network, with more than 7700 retail outlets, but most of them are operated by inexperienced retailers. They are unwilling to cut prices and clear up the over season stocks, leaving little room for new high priced products.

This caused the inventory problem not to be solved in time, while the support from Li Ning Co for some dealers was not in place, which also caused some differences among distributors.

Li Ning Co has more and more layers. The charm of the company's influence on distributors is fading away, and the blood contact with distributors is weakening.

All this stems from the Li Ning Co itself.

At the end of June 2010, at the 20 year old birthday celebration of the company, the new Logo of "Lining cross action" was unveiled, while the new brand slogan "let change happen" replaced what consumers already knew "anything is possible".

But at the same time of changing the logo, Lining's brand strategy has directly crossed the "post-80s", targeting the core target consumer group to the same generation of "90s" generation.

However, Lining's "post-90s" customers, who had devoted their efforts to training, did not seem to buy it. According to a survey by post-90s, the "90's" favorite sneakers are Nike and Adidas.

In the "post-90s" mentality, Lining brand is still only one of the local brands, and the "70 after" and "post-80" customers who are relatively capable of purchasing are also drawn to the target customers list by the Li Ning Co.

What is more serious is that the appearance of the new trademark in 2010 caused the supplier to be injured again.

The Li Ning Co completed the order meeting before issuing the new trademark, which means that all the old orders in the supplier's hands are stocking at birth.

The crisis finally showed itself.

Before the end of 2010, the order volume of Li Ning Co increased by 20%30%.

At the order meeting, the volume of orders dropped suddenly, which resulted in Li Ning Co's stock price plunging more than 20% within two days of December 20th and 21st, and its market value evaporated more than HK $4 billion 500 million.

After that, the Li Ning Co's stock price declined with the increasingly poor management data. The market value of the company was only about 15% of the peak time, and the top of the domestic sports brand was also in 2011.

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The bigger crisis followed.

Chief operating officer Guo Jianxin, chief market official Shiwei, general manager of Lotto business department Wu Xianyong, director of e-commerce Department Lin Li and other senior executives have left.

This has made Lining, who has been hiding for fifteen years, on pins and needles.

In July 5th, the Li Ning Co announced that Zhang Zhiyong had resigned as chief executive and appointed TPG partner of private equity fund Jin Zhenjun as executive director and executive vice chairman.

Before hiring a new chief executive, the company's business will be led by Lining, founder and executive chairman, and vice president Jin Zhenjun. Lining will focus on external affairs, while Jin Zhenjun is mainly responsible for the internal affairs and operation of the group.

Jin Zhenjun is from TPG, a Korean American who is the same age as Lining.

Previously due to

His investment and pformation made him famous in the retail field.

Jin Zhen Jun Zhang wants to speed up turnover, to get closer to the market, to optimize the supply chain process, and optimize the process of product development.

In the first half of this year, Li Ning Co has reduced more than 900 stores and its dealers have been cut to 52.

Before, Li Ning Co only conveyed shoes and T-shirts to distributors, with little concern about whether they were sold or not.

Today, Li Ning Co has launched a new system, which will be registered on computers at Li Ning Co headquarters whenever customers purchase Li Ning Co products.

The purpose of this system is to enable Li Ning Co to understand the real stock situation in real time.

But Li Ning Co still has a long way to go.

In the 2012 China Daily, Li Ning Co said that it started a series of reform actions in 2011. However, due to the influence of the market environment and the stage challenge of the enterprise's own development, the reform results have not yet appeared, and the company's performance and financial indicators have also been greatly affected.

However, it is important that the board and management of the company continue to analyze and summarize in the process of pformation, and actively promote the implementation of the pformation plan.

Next, Li Ning Co will mainly focus on accelerating the retail terminal inventory clearance, optimizing the terminal inventory structure, improving the channel construction and strengthening the channel efficiency and so on two aspects as the focus of business.

Both TPG holdings and Lining's comeback were recognized by the capital market. Li Ning Co's share price rose two and 21% respectively by 7.25%.

But even so, the industry still has reservations. Li Ning Co's pformation will take a long time, and the brutal competition in the market may not have given much time.